As China's economy shifts down a gear, its banking sector is preparing for a new chapter in the country's development. There is broad consensus that GDP growth, along with bank revenues and profits, will be relatively contained in the next three years. Increased domestic consumption and technological innovations will be the main drivers of an economy that will be marked by a flat property market and by waves of social and economic reforms.

These are some of the views captured by the 6th annual Chinese bankers' survey, prepared by the China Banking Association (CBA) and PwC. Based on responses from nearly 1,200 banking executives, along with in-depth interviews, the survey looks at the effects of economic restructuring in China and the opportunities and challenges these create for the banking sector.

"Reforms of the financial sector and the tax system will have profound effects on China's economy," says Raymond Yung, financial services leader for PwC China. "The reform that has captured bankers' attention the most is interest rate liberalization. The rise of internet finance and of privately-owned banks is also very much on their radar. Nearly half believe that internet finance is diverting deposits away from traditional banks and 30% believe it is pushing up the cost of funding."

Bankers believe that internet finance firms have the edge over traditional financial institutions in terms of convenience and cost, while the latters' advantages are in risk management and the size of their customer base. Consequently, bankers are enhancing their electronic banking channels and pursuing strategic cooperation with internet companies. Half of the bankers surveyed think it is very important to strengthen the regulations around internet finance. They look to the People's Bank of China and the other regulators to do so.

Roughly 70% of bankers expect to see GDP growth of less than 7.5% for the next three years. And more than 75% expect to see no increase in either prices or transaction volumes in the real estate market. Bankers' expectations of their revenues and profits over the next three years are similarly subdued - most expect these to grow by less than 20% over the period. Despite all this, bankers are upbeat about the macro-economic policies that have been implemented over the past year, with over 80% believing that targeted monetary easing has had positive effects.

"The survey reveals a banking industry that is in a state of flux," says Jimmy Leung, banking and capital markets leader for PwC China. "Many banks are going through fundamental restructuring and a majority wish to internationalize - especially so that they can follow clients who are going global. Half of those surveyed will still opt for Hong Kong, Macau or Taiwan as the starting point for internationalization. Most will depend on their payments and settlements business to help them break through overseas."

The biggest obstacle to overseas expansion cited by the banks is a restricted talent pool (69.8%). Other hurdles include a lack of information about foreign markets (61.1%) and insufficient experience of strategic planning (59%).

Banks have registered an increase in non-performing loans (NPLs) - a trend that is expected to continue. NPL ratios are particularly high in the property sector, which is weighed down by overcapacity, and in polluting and energy-intensive industries. On the positive side, bankers are comfortable with their bad debt provision. More than 75% expect to achieve a provision coverage ratio of over 250%.